“The government must do more…”

Update 5% Interest rate held as UK house prices continue to tumble…
Ditto NI house prices…

The Golden Mile turns into a wasteland, all those blocks of new flats lie empty, half finished building sites are abandoned, the elderly hunch over cold radiators wrapped in blankets, employment queues lengthen for the first time in decades… is this the shape of things to come?

A third of the NI population is in fuel poverty, says the Consumer Council, the highest level in the UK.
Some easing is forthcoming. 80 year olds will receive an additional £100 alongside their winter fuel payments this year, while households with those over 60 will receive an additional £50.

The state of the Northern Ireland economy, the plight of the elderly in particular, was given a rare spot in the Westminster limelight yesterday (although to a largely empty House). We were treated to the wholly unique spectacle of one set of ministers, NI First minister, and the finance, environment and culture ministers and one one ex-finance minister and DFM, demanding “something must be done” from another set of ministers in the Treasury here in London. There was a lot of handwringing but not much else on offer.

The building industry is the latest to announce deep pain throughout the UK and with inflation an equal threat, no relief is likely from lower interest rates. Everyone knows the fuel tax escalator will be frozen but the Chancellor isn’t ready yet to make the announcement. Not even loud protests from Gregory Campbell and Sammy Wilson could wring it out of them (see Hansard report).

How bad will it get? Is NI worse off than other regions?

Big questions: Should NI ministers be allowed to cut local spending and keep the savings, rather than hand them back to London?
If the powersharing Executive had tax raising powers, would they deal with the turn-down differently from the UK government?
The main text for the DUPs’ sermons was basically an analysis of soaring fuel costs by Eleanor Gill of the Consumer Council

Gregory Campbell
We have seen electricity price rises of the order of 20 per cent. in 12 months; natural gas prices have risen by 28 per cent., and home heating oil in Northern Ireland has risen by 100 per cent. in a 12-month period

and his remedy?

My party and I have been lobbying the Treasury for some time to increase personal allowances significantly. I notice that a temporary measure is being implemented to allow for the 10 per cent. debacle. That measure needs to become much more significant. A significant increase in the amount of take-home pay, particularly of the lower-paid, that is not subject to national insurance contributions or income tax will greatly assist them over the next 18 months or thereabouts, when the pressure will be greatest.

Polite stonewalling came from Jane Kennedy junior Treasury (and ex-NI) minister. The hard message is that no, nowadays, Northern Ireland is not worst off ( or uniquely deserving)

In Northern Ireland, unemployment has been halved in the past decade, with long-term unemployment down by 90 per cent. Its unemployment rates are among the lowest in the UK, and there are 100,000 more people in work than there were 11 years ago: a fact that brings me particular pleasure given my short time—one year—as Minister with responsibility for employment in Northern Ireland

DUP MPs sort of know that the days of super-special NI are gone and took care to spray around references to the “rest of the UK.”

All the same Kennedy had to admit that : Northern Ireland Electricity advises that, following the 14 per cent. tariff increases in domestic electricity prices, Northern Ireland prices will be 2.1 per cent. above those in comparator regions in Great Britain, 9 per cent. lower than the western European average and 9 per cent. lower than those of the Electricity Supply Board in the Republic of Ireland. None of that will be of comfort where prices are increasing, but it is worth the House bearing in mind the context of the price rises.

… with an extra 14% to come, interjected David Simpson DUP MP for Upper Bann.

A warning sign of deepening poverty is people borrowing from Credit Unions just to pay their bills, noticed by SDLP leader Mark Durkan.

The Consumer Council has already called for easier lending by Credit Unions

But not much hope of government “doing something big”.

Meanwhile, the price of an average white loaf went up 10p in a month.

  • BonarLaw

    The Scottish Executive has tax varying powers. Let’s see if it uses them.

  • Wild Turkey

    Brian

    The Institute for Public Policy Research (IPPR) released a report today Fair Shares: Barnett and the politics of public expenditure examining the way the devolved institutions are financed in the UK . It finds that the current arrangements are neither fair nor equitable, and no longer appropriate for devolution,

    The report recommends Northern Ireland could move towards the same model as Scotland, although the new assembly may need time to bed down before financial powers are devolved.
    Given the evidence to date it seems unlikely that in my lifetime or that of my children, currently aged 8 & 9, the assembly will reach the minimum standard of ‘maturity’ to have any serious discretion over taxation devolved from Westminster.
    Question, who amongst the current esteemed 108 MLAs would suggest themselves as a Finance Minister with the credibility and IMPARTIALITY to implement and execute and devolved taxation regime?

    Anyway, control< ->click on the link below should access the IPPR report. If not, a summary is available on the IPPR website.

    http://www.ippr.org/ipprnorth/pressreleases/?id=3204

  • fair_deal

    “Should NI ministers be allowed to cut local spending and keep the savings, rather than hand them back to London?”

    Hasn’t this pretty much been agreed between DFP and Treasury already? (Are you confusing revenue/capital spending with assets sales?)

    “If the powersharing Executive had tax raising powers, would they deal with the turn-down differently from the UK government?”

    Do you mean tax-varying? I doubt raising taxes would be particularly beneficial or appreciated either by business or the public.

    A freeze of the regional rate (a cut in real terms) has been set out for the next three years so the taxes within the Executive’s power are being controlled.

  • Rory

    Times ahead indeed look tough for N Ireland but at least you are better off than we poor sods in London where we face all the same problems plus we have Boris Johnson as Mayor.

    Of your charity, I beseech you, pray for us poor sinners.

  • Brian Walker

    Fair deal, I know that revenue carry over from one year to another has been allowed for some years now, but is that not ad hoc? And it doesn’t seem to me the same point as making actual expenditure cuts to make savings. No, I’m not confusing this with the obviously different them of asset sales.
    But perhaps you could add information and develop your point. I’m no expert.

    Tax varying or tax raising powers? No, I wasn’t mixing them up, although tax varying is the more immediate discussion. The 3%+ or minus as in Scotland is thought to be of limited use but there are other tax varying ideas. The rates freeze is only an interim answer, as you’ll agree. I mean blue skies thinking for a re-configuration of the tax structure involving elements including corporate taxation, a replacement of the rates and a partial realignment of VAT within EU rules.

    Any more thoughts on all this, Fair Deal?

    Wild Turkey. Thanks for the tip-off about IPPR on Barnett. I’ll brace myself for a read. Perhaps others will too?

  • kensei

    Brian

    The two are intrinsically linked. The +-3p on basic income tax is of limited use because it simply comes out of a fixed budget. One rationale for tax cuts is that it spurs growth and ultimately increases revenues: but if it did, none of that money would be seen by Scotland. And as you point out, it’s only one tiny bit of the Tax Armoury.

    The answers are yes and yes.

    FD

    I think there are certain tax raises that could be considered, even in a downturn. It’s certainly possible that the Assembly might wish to raise taxes in one place in order to cut them elsewhere, for example and I’m not convinced introducing a 45% or 50% rate above £100,000 or £250,000 to pay for cuts down the scale would be terribly unpopular.

    But hey, let’s have other people make those decisions for us.

  • fair_deal

    Brian

    “but is that not ad hoc?”

    AFAIK it is no longer ad hoc. It was the key success on the peace ‘dividend’ talks.

    “And it doesn’t seem to me the same point as making actual expenditure cuts to make savings.”

    If it is discretionary funding allocated under Barenett I would assume they would be pretty free to do as they chose within the statutory obligations.

    ” The 3%+ or minus as in Scotland is thought to be of limited use but there are other tax varying ideas.”

    By my reckoning if Scotland were to cut 3p off the tax rate that would be just under a 10% cut in someone’s tax/NIC liabilities for those in the lower band. Wouldn’t certainly help with rising prices etc but finding the cuts to achieve it would be a huge task. The SNP probably wouldn;t want to risk it.

    “The rates freeze is only an interim answer, as you’ll agree.”

    Three years is not to be sneezed at and considering it will coincide with slower possibly even negative growth and rising inflation it will still be timely. Plus there could be some further savings found ie reduction in no. of departments.

    “I mean blue skies thinking for a re-configuration of the tax structure involving elements including corporate taxation, a replacement of the rates and a partial realignment of VAT within EU rules.”

    Corporation tax I think the UK has to bite the bullet and take the short/medium term hit of significantly reducing the rate. I don’t see regional variation flying either within the UK or getting EU permission.

    I suppose you could go for the US model of states having sales tax (similar to VAT) but with the EU wanting harmonisation probably a dead duck before you start.

    The thing that will be addressed much quicker is probably Barnett rather than any radical overhaul of the tax system.

    The Conservatives are also making an increasingly good case about radically changing tax bands instead of the bureaucratic tax credits system.

  • wild turkey

    ‘I suppose you could go for the US model of states having sales tax (similar to VAT) but with the EU wanting harmonisation probably a dead duck before you start. ‘

    FD

    some american states, and indeed municipalities, also levy personal income tax.

    also agree that Barnett is long due an overhaul,especially if the Tories win the next general election based on a strong showing in England.

  • billie-Joe Remarkable

    If it means more threads as long and boring as this there may be more dark times ahead, aye.

    Does everyone have to rehearse every possible scenario from every possible angle when posting on here? And do we really need the history lessons ahead of some banal point?

  • willowfield

    Ironically – given that we have only recently apparently reached a consensus here that the public sector is too big – it could be the size of the public sector which insulates us from the worst of the coming recession (as it did the last time).

  • joeCanuck

    An article on the BBC website says that 1 in 7 retired people in N.I. are currently living in poverty. That is an utter disgrace. Those numbers will only increase unless immediate action is taken by the Executive.

  • niall

    For a long time posts on the economy have been poorly attended hereabouts.

    Norn Iron is in my view well placed better to weather these storms than places across the way. This economic shock will hopefully be an opportunity for locals to pull heads out of the sand they disappeared into in the 60’s.

    This is a good place with good people and if we continue to runa parasite economy with no further vision we get all the pain we deserve.

    If we look to make the best of our southern and eastern opportunities and use those in a positive way to do something beyond the box we could excel. Maybe we just need a bit of space, confidence and encouragement that this is what we want to do?

    As for house prices they are stuffed for reasons too boring to regurgitate, though i do fear our learned politicians doing “something must be done” and adding to the woes of us all.

  • The Raven

    Willowfield wrote “Ironically (SNIP) it could be the size of the public sector which insulates us from the worst of the coming recession (as it did the last time).”

    Exactly. I have always maintained that it will only be through slow and gradual change that we can lever ourselves into less of (what is oft referred to here) as a basket case economy. There were trolls on here advocating the “sack the lot of them” line. Whither now, for that point of view? Fancy throwing the main tenet of the local economy on the precarious scrapheap of the global market, untrained and unready?

    This place was always going to be a basket case – it’s predominantly rural; it is separated from its main jurisdiction by water; it operates under a less attractive tax regime than our closest land neighbour; we’re peripheral to London, Dublin and Europe; everywhere outside of Belfast is considered peripheral again; we utterly fluffed the last ten years of EU Structural Funds – sure is there any point in going on?

    Niall hits it on the head: “Maybe we just need a bit of space, confidence and encouragement that this is what we want to do?”

    We *could* have a complete overhaul of the tax regime – this place is small enough, and yet diverse enough to run a parallel system to see how well it works.

    As I posted elsewhere only this week – we’re entering a period of massive change that will require innovative thinking and incredible buy-in not only from the public, but each of those 108 idiots that we vote for. Unfortunately, I see none of them embued with the sort of far-reaching thinking we need.

    This month’s Parliamentary Monitor has a piece by Matthew Parris called Drifting in Neutral, which while only discussing transport, is well worth a read to show my point. I think it is best summed up by Parris’ following point:

    “But I look forward to hearing a new transport secretary announce that he or she is there to push through, by the force of their own will, a modest number of pet projects which, after tossing a mental coin, they have plumped to promote. And it is their civil servants who are there to listen. And damn the business case.”

  • The Raven

    As for this: “80 year olds will receive an additional £100 alongside their winter fuel payments this year, while households with those over 60 will receive an additional £50.”

    How magnanimous. Frankly, we treat our older persons here shamefully. Perhaps even more shamefully than we treat young people.